Buying and selling: the financials

Discussion in 'The Buying & Selling Process' started by GK1611, 31st Jan, 2020.

Join Australia's most dynamic and respected property investment community
  1. GK1611

    GK1611 Active Member

    Joined:
    26th Jun, 2017
    Posts:
    31
    Location:
    Brisbane
    Hi,

    I'm wondering if someone can help me walk through the steps of buying and selling in terms of the financials. I'm just trying to make sure I know the money that I need and when if I buy before I sell. This is my preference, but does depend on a few factors. Here is a similar but not exact scenario to what I'm in as an example:

    My PPOR in Brisbane is worth approx 800k, and we owe about 640k on it. We have 65k saved.

    We are looking at houses around the million range, again in Brisbane. We have an LMI waiver and banks are willing to loan up to 95% LVR on the new house.

    We are thinking of buying first, and then selling and trying to time the settlements so that the house we purchase settles, and then roughly a fortnight later our PPOR settles. In terms of the order of when things need to be paid, does this sound roughly correct?

    1) Offer on new house - pay deposit to secure (let's say 20k), house costs 1 million for arguments sake
    2) Building and pest, lawyers etc - sign contracts (approx 5k although legal bill might be after settlement) - 90 day settlement
    3) Put PPOR on market, house sells - lawyer costs to get to signed contract stage paid for in previous step - 60 day settlement
    4) New House settles - pay remaining deposit to get under 95% LVR (in this example let's say 31k)
    5) Removal costs from moving from old PPOR to new house (3k)
    6) Old PPOR settles, amount owing to bank paid (640k), real estate agent takes their cut out of buyers deposit and any extra comes out of here (20k + 5k marketing)
    7) Lawyer costs paid (5k)
    8) Stamp duty paid on new property (within 30 days of settlement) - approx 34k


    Any thoughts/comments/corrections very welcome
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,882
    Location:
    Australia wide
    That is pretty much it - but stamp duty will need to be paid at settlement if the property will be mortgaged.

    Can you qualify for both loans at the same time?
     
  3. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,041
    Location:
    Sydney NSW
    95% LVR LMI waiver.. existing ANZ client & medico?

    In my experience you want to prepare for the sale first to take pressure off the process. This means engaging a REA to get the listing ready to post, and the solicitor to draw up the contract of sale. You can control the sale process and define terms like settlement far easier than the purchase in the current market (though Brisbane isn't as hot as inner SYD/MEL at present).

    You may be able to use a deposit bond in lieu of cash for the purchase, and bridging may also be another option.

    Otherwise the sequence makes sense!
     
  4. GK1611

    GK1611 Active Member

    Joined:
    26th Jun, 2017
    Posts:
    31
    Location:
    Brisbane
    We would need to confirm with the bank but they have suggested we will. I thought stamp duty was payable within 30 days of settlement in QLD (I might be mistaken tho, I forget what happened last time)
     
  5. GK1611

    GK1611 Active Member

    Joined:
    26th Jun, 2017
    Posts:
    31
    Location:
    Brisbane
    Exising CBA client and wife is a solicitor who exceeds the income criteria
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,882
    Location:
    Australia wide
    It might be, but no bank will accept settlement unless duty has been paid - they control this by their ability to withhold funds
     
  7. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,043
    Location:
    Australia
    The amount of cash available seems very tight. Not enough cash for both stamp duty and deposit, and if the sale takes longer than expected, you are paying interest on 1.6m. The (low) amount of savings suggests your cashflow isnt great to begin with.

    Unless you have another source of short term funds available (family, etc) youd be better off selling first.
     
  8. GK1611

    GK1611 Active Member

    Joined:
    26th Jun, 2017
    Posts:
    31
    Location:
    Brisbane
    Absolutely correct. Sorry, this is roughly the current situation. By the time we buy and sell and are ready to settle the savings will be above the deposit + stamp duty etc.
     
  9. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,043
    Location:
    Australia
    Do you actually live in Sydney or Brisbane?
     
  10. GK1611

    GK1611 Active Member

    Joined:
    26th Jun, 2017
    Posts:
    31
    Location:
    Brisbane
    Brisbane (used to live in Sydney)
     
  11. Gestalt

    Gestalt Well-Known Member

    Joined:
    20th May, 2018
    Posts:
    81
    Location:
    Brisbane
    Stamp duty is paid and the transfer stamped prior to settlement in Qld. The bank will not advance funds on settlement otherwise.
     
  12. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,129
    Location:
    Brisbane
    Sounds like a lot of pressure. Why not sell first?